(This article was published in Port Folio Weekly, March 9, 1999. They hold the copyright.)
Power Play
Proponents of electric-power deregulation say it will benefit the average homeowner. But critics insist big business will be the only winner.
By Brian Wasson
Electricity
has always been one of those things most Americans take for granted. You
flip a switch, the light goes on.
No problem.
But because of legislation recently passed by Virginia's General Assembly, power is becoming something worth thinking about.
The House of Delegates -- with its 77-23 vote -- opened up the electric power market for competition in 2002. Virginians, in effect, would have the same kinds of choices with power they already have with long-distance telephone companies.
The bill is pending approval from Gov. Jim Gilmore, who is expected to sign it.
Virginia is following the lead of California and other states by eliminating the state-controlled monopoly system of electric utilities and opening up the sale of energy to competition, ostensibly to promote lower prices.
But SB 1269 has gone largely unnoticed in a General Assembly session filled with more provocative and digestible legislation: abortion regulations, felony crime records on the Internet, patient rights, a Suffolk landfill.
Bill Axcell represents the Alliance for Lower Electric Rates Today (ALERT), one of the bill's architects. "I think it will benefit industrial, commercial and residential customers, but the initial benefits will go to the largest customers," he says.
Under the bill, Virginians would get to choose who actually makes their power, but not who delivers it. That makes some fear that deregulation will lead to decreased service, or varying levels of service between those who buy their power from the local utility and those who don't.
The local electric utility will still own the transmission lines, poles and meters, and will likely charge a separate fee for their use. But that won't affect service, says Jim Norvelle, a spokesperson for Virginia Power.
"There is no competitive advantage to shirking someone not buying power from us," he explains. "The beauty of this bill is that the customer will be able to choose."
ALERT's Axcell adds that SB 1269's authors were careful to ensure that "the local utility will still be required to provide the same quality of service for customers."
Because of the billions of dollars at stake, some consider electric utility restructuring to be one of the most important issues to come before the General Assembly in 20 years.
But the bill has achieved notoriety in other ways.
"We would rank it among the worst bills in the country," says Wenonah Hauter, director of the Washington, D.C.-based Public Citizen's Critical Mass Energy Project. "We're skeptical that the legislature would do anything to reduce the companies' profits."
Deregulation supporters say electric rates will go down once companies are forced to compete with one another in a consumer-driven marketplace.
Critics fear it will favor large businesses and industries, which purchase huge volumes of electricity, rather than homes and small businesses.
"In theory we're for deregulation," says Bruce Parker of the Virginia chapter of the Sierra Club. "In a perfect world, consumers would be able to choose to pay a little bit extra for clean energy. But the cost of marketing to individual consumers is too high for it to be worthwhile."
According to the Edison Electric Institute, an association of electric companies, the average rate Virginians pay is 7.75 cents per kilowatt hour, slightly below the national average of 8.43 cents. Hawaii has the nation's highest average rate at 14.85 cents, Washington state the lowest at 4.95 cents.
"In a state like Virginia, with low rates to begin with, there probably won't be a whole lot of benefits," says Public Citizen's Hauter. "The large industrial customers and the energy companies will benefit the most in the short and long term.
"Really, it's Virginia Power's bill."
Hauter and other critics believe Virginia Power will ultimately benefit because revenues from additional surcharges will outweigh any losses to new competitors.
Many statewide power companies have embraced deregulation -- or maybe they've seen the writing on the wall. Last year, the General Assembly passed legislation calling for statewide consumer choice of electric providers by 2004, but did not give specifics.
Supporters point out two inclusions in the bill which would benefit smaller electric consumers.
First, there is a rate cap through 2007 which would protect consumers should costs rise.
Second, consumers will be allowed to join together and buy power in bulk from suppliers. In the near future, groups such as the American Association of Retired People, homeowner's associations and even municipalities may try to purchase energy at preferred rates.
That means, just like with phone companies, be prepared for a deluge of junk mail and dinner-time phone calls offering discounted electricity, signing bonuses and maybe even frequent-flier miles to get your business.
In states where deregulation has already begun, consumers are being lured by similar promises.
Oliver Deakyne of Huntingdon Valley, Pa., took advantage of that state's recent deregulation and switched from the incumbent utility to Virginia-based Columbia Energy.
"I figured I'd try something different," Deakyne says. "They offered me a 15 percent discount for a year, so I figured I didn't have anything to lose."
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